Company Overview: Santos Limited (ASX: STO) is a domestic gas supplier with a portfolio of high-quality liquified natural gas (LNG), pipeline gas, and oil assets STO is largely involved in the production of natural gas (LPG, ethane, methane, CSG, LNG shale gas, condensate), and oil. Duxton Water Limited (ASX: D2O) is an Australian company, which owns and operates a diverse portfolio of water assets, primarily situated in the Southern Murray Darling Basin region of Australia. Kalkine’s Market Event Report covers the Investment Summary, Event Summary, Data Insights & Analysis, Key Financial Metrics, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.
Investment Summary
Event Highlights
Data Insights and Analysis
Key Drivers versus Key Challenges
According to the announcement on Finance and Wealth data under the Australian Energy Accounts, two ASX stocks are identified to showcase the momentum.
(1) Santos Limited (ASX: STO)
(Recommendation: ‘Buy’ at AUD 7.030, Potential Upside: Low Double-Digit)
(M-cap: AUD 22.73bn; Annual Dividend Yield: 5.05%)
Company Overview: STO is a domestic gas supplier with a portfolio of high-quality liquified natural gas (LNG), pipeline gas, and oil assets STO is largely involved in the production of natural gas (LPG, ethane, methane, CSG, LNG shale gas, condensate), and oil.
3 month ended 30 September 2023 Financial Year (Q3FY23) Financial Performance: The top-line growth increased by more than USD 1.4mn on QoQ, and stood in at USD 1,436mn in the Q3FY23 as compared to USD 1,336mn Q3FY22. STO witnessed growth in production of 23.3 mmboe, driven by an increase in crude oil production in PNG. The company reduced debt by USD 1.4bn in 3QFY23.
Outlook: The STO management focused on increasing production by 6% CAGR from 2024 to 2028, and targeted free cash flow to USD 14bn from 2024 to 2028. STO aims to net zero scope 1 to 2 emissions by 2040 and reduction by 30% in scope 1 and 2 emissions by 2030.
The stock has witnessed a decline of ~5.6375% in last six months, and over the last nine months, it increased by ~0.2853%. The stock has a 52-week low and 52-week high of AUD 6.725 and AUD 8.090, respectively, and is currently trading below the 52-week high-low average. STO was last covered in a report dated ’5 October 2023’.
(2) Duxton Water Limited (ASX: D2O)
(Recommendation: ‘Hold’ at AUD 1.600 Potential Upside: Low Double-Digit)
(M-cap: AUD 239.77mn)
Company Overview: D2O is an Australian company, which owns and operates a diverse portfolio of water assets, primarily situated in the Southern Murray Darling Basin region of Australia.
6-month ended June 2023 Financial Period (FY23): D2O half-yearly net profit after tax stood at AUD 2.8mn in 1HFY23 from AUD 4.4mn in 1HFY22 even though the wettest condition of the last 60 years and the company’s water entitlement portfolio witnessed a new high of AUD 401mn in 1HFY23. D2O paid a dividend of AUD 3.4 per share (fully franked) in 1HFY23. The company increased the size of its portfolio by 4.2 giga litres (+5% by volume).
Business Update: D2O successfully executed several new leases in early 2023. D2O successfully acquired AUD 39.1mn (or 4770 megalitres) of high-security water entitlements from Treasury Wine Estate.
Outlook: The Murray Darling Basin plan expects 2.750 GL plus and adding to 450 GL from the efficiency project by June 2024.
The stock has witnessed a dip of ~2.7355% in last three months, and over the last one year, it increased by ~0.3102%. The stock has a 52-week low and 52-week high of AUD 1.465 and AUD 1.802, respectively, and is currently trading below the 52-week high-low average. D2O was last covered in a report dated ’15 August 2023’.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is neither an Indicator nor a guarantee of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 27 November 2023. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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